having both shotgun and put/call option on shareholder agreement
Is it possible on the Shareholders Agreement to have both a shotgun clause and a put/call option clause?
Thank you for any advice.
Founders Agreement Purchase Agreement
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For completeness it would be nice if you could elaborate on what these terms mean. – Darkcat Studios 11 years ago
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both the shotgun clause and the put/call option clause (option to purchase) are dispute resolution clauses that allow one shareholder to FORCEFULLY buyout another shareholder's shares. The details of these clauses are complicated but can be found by googling. Hope that helps. – Dave 11 years ago
1 Answer
In principle, yes, you can have multiple clauses like this in a shareholder's agreement. When you invoke a clause, you would state which clause you are invoking.
I'm not a huge fan of put/call clauses. I find vesting to be a much cleaner option. Of course vesting implies that you will continue to have your ex-partner holding shares in your company (if they pass the minimal vesting period). In the early stage, a shotgun clause may be reassuring. Over time it loses value and may become an obstacle.
If you are an outside investor in a company which has put/call/shotgun clauses it is a cause for concern. You are backing the people to create the company. With these clauses you never know who you are backing, and if the person you really like is going to somehow leave, have no more interest in the company, and leave everything in the hands of a second person you may not trust as much. Often professional investors will get these clauses taken out of your shareholder agreement before investing. If you want outside, professional money, it is maybe better not to have them at all.
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thanks for answering. Can you please clarify what you meant by "With these clauses you never know who you are backing?" I thought that, for example, with a call option clause, you can easily remove unwanted shareholders from the company... – Dave 11 years ago
